ENG-1989 — Page 87

THE ECONOMY

The Inland Revenue Department is responsible for the collection of betting duty, entertainments tax, estate duty, hotel accommodation tax, stamp duty, and earnings and profits tax.

Betting duty is imposed on bets and on the proceeds of Mark Six lotteries. The rate of duty is 9.5 per cent or 16 per cent of the amount of the bet, depending on the type of bet placed, and 30 per cent on the proceeds of lotteries.

Entertainments tax is imposed on prices of admission to cinemas and to race meetings at rates which vary with the admission prices. These average about nine per cent in the case of cinemas and 28 per cent in the case of race meetings.

Estate duty is imposed on estates in Hong Kong. The rates of duty charged range from a minimum of six per cent on estates valued between $2 million and $2.5 million to a maximum of 18 per cent on estates valued in excess of $5 million. Estates valued at less than $2 million are exempt from duty.

Hotel accommodation tax of five per cent is imposed on expenditure on accommodation by guests in hotels and guest-houses.

The Stamp Duty Ordinance imposes fixed and ad valorem duties on different classes of documents relating to assignments of immovable property, leases and share transfers.

Earnings and profits tax are levied under the Inland Revenue Ordinance. In Hong Kong, persons liable to tax may be assessed on three separate and distinct sources of income, namely business profits, salaries, and income from property.

Profits tax is charged only on net profits arising in Hong Kong, or derived from a trade, profession or business carried on in Hong Kong. Profits of unincorporated businesses are currently taxed at 15 per cent and profits of corporations are taxed at 16.5 per cent. Tax is payable on the actual profits for the year of assessment. Tax is paid initially on the basis of profits made in the year preceding the year of assessment and is subsequently adjusted according to profits actually made in the assessment year. Generally, all expenses incurred in the production of assessable profits are deductible. There is no withholding tax on dividends paid by corporations and dividends received from corporations are exempt from profits tax.

Salaries tax is charged on emoluments arising in or derived from Hong Kong. The basis of assessment and the method of payment are similar to the system for profits tax. Tax payable is calculated on a sliding scale which progresses from three per cent to 21 per cent at multiples of three per cent on the first seven segments of net income (that is, income after deduction of allowances) of $10,000 each and then to 25 per cent on the remaining net income. No one, however, pays more than 15 per cent of their total income. As from April 1, 1990, a system of separate taxation for married couples will come into operation and will apply to final assessments for 1989–90 and thereafter. Under this system, married couples will be separately assessed for salaries tax. However, where either spouse has allowances that exceed his or her income, or when separate assessments result in an increase in salaries tax payable by the couple, they may elect to be assessed jointly.

The owner of land or buildings in Hong Kong is charged property tax at the standard rate of 15 per cent on the actual rent received, less an allowance of 20 per cent for repairs and maintenance. A system of provisional payment of tax similar to that under the profits tax and salaries tax applies. Property owned by a corporation carrying on a business in Hong Kong is exempt from property tax but the profits derived from the ownership are chargeable to profits tax.

Business registration fees, which form part of the revenue from fees and charges, are also collected by the Inland Revenue Department. Business registration is compulsory for

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